Stockbroker Fraud and Investor Claims for Investment Losses

Are You a Victim of Investment and Stockbroker Fraud?

As a consumer, you sought the best and most professionally sound advice from your financial advisor or broker. However, you did not get what was promised, and now your life has been negatively impacted.

Millions of Americans across the United States have fallen victim to broker misconduct and other instances of investor claims, including negligence, churning, and misrepresentation. Victims of investment fraud and broker misconduct are entitled to receive damages to compensate for any losses.

Investor Claims: How to Know if You Are Entitled to Make One?

If you have experienced any of the circumstances mentioned below, you owe it to yourself, at a minimum, to seek a free consultation with our stockbroker fraud lawyers at SSEK Law Firm.

The Financial Advisor Contacted You Via a Mailer or Telephone

It’s not uncommon for advisors in the financial industry to hold seminars touting their expertise. These meetings made representations regarding sound financial plans for your savings, retirement, or children/grandchildren’s college plans.

What you received turned out to be markedly different than what was presented to you. You were lulled into believing all was well when it was not. Now your plans are ruined.

You Were Referred by a Colleague, Friend, or Relative

You heeded the good-faith advice of someone you trusted. Whether a colleague, friend, or relative. Or worse, the financial advisor may be a colleague, friend, or relative.

If you were referred by someone you know, it is not their fault. But if you were wronged, you should act. It’s not a slight against confidants if you take action against the recommended broker. In some instances, the decision to pursue legal remedies may be further complicated by direct familiar relationships or friendships.

In such situations, the advisor in question did their best but was simply negligent most of the time. In most of these instances, the advisor was led astray by his own employer with faulty information and/or products.

You have the right to file investor claims via the FINRA arbitration process for a host of actions discussed herein:

  • Investments
  • Broker Misconduct
  • Brokerage Firm Misconduct

Shepherd Smith Edwards & Kantas, LLP (SSEK Law Firm) has an expert team of securities and stockbroker fraud lawyers devoted to representing investors who have been wronged and victimized by brokers and financial institutions.

We represent investors victimized by broker misconduct and negligence on behalf of financial institutions. Many investors have fallen victim to churning, misrepresentation, and other investor claims. Speak with our securities lawyers today at (800) 259-9010.


Stockbroker and Investment Fraud What is Stockbroker Fraud?

A brokerage firm or broker can be held liable if that firm or broker misrepresents material facts or omits to disclose material facts to the investor regarding an investment, causing the client to lose money on that investment.

Often the misrepresentations or omissions disguise the risk associated with a particular investment. A broker has a duty to disclose all of the risks associated with an investment fairly.

When it comes to a financial advisor, that person should be a trusted, transparent and reliable source of recommendations and advice. It is the advisor's duty to provide their clients with suitable recommendations and treat their clients with fairness.

However, there are brokerage firms out there that will abuse their position to bolster their own profits, all at the expense of investors. It is critical to be able to identify this type of behavior and assess if you are at risk or have been a victim of stockbroker fraud.

Why Should SSEK Law Firm Represent Me in a Stockbroker Fraud Case?

SSEK Law firm represents clients throughout the U.S, as well as Puerto Rico, and can help you recover any investment losses you may have incurred from dishonest or irresponsible brokers and brokerage firms.

When you find yourself in a situation where a broker or brokerage firm has wronged you, you need to know all of your legal options and partner with a firm you can trust. SSEK Law Firm has represented clients in stockbroker fraud cases for nearly 30 years. Our skilled team of securities attorneys has 100 years of combined experience.

Our Stockbroker and Investment Fraud Practice Areas Margin Account Abuse

A "margin account" is a brokerage account in which the brokerage firm loans money to the investor. For example, if $100,000 is deposited into a "cash" account, it can be used to buy $100,000 worth of stock. Purchasing securities in this way is known as "buying on margin." While investing in this way can increase an investor's purchasing power, it also increases the risk of loss.

For many investors, trading in this way is far too risky and unsuitable. Any broker-dealer or financial advisor encouraging an inexperienced investor to use a margin account that is not suitable or appropriate is committing stockbroker fraud.


Churning occurs when a broker engages in excessive trading in an account. A broker churns an account in an attempt to generate commissions. He will often sell the winners to show a small profit and keep the losers.

Broker Negligence

Brokerage firms and their advisors have an obligation to carry out a duty of care when giving investment advice and managing a customer's account. Investors may bring a negligence claim against a broker when investment losses occur under the supervision of a financial advisor.

A broker may be found guilty of negligence when they did not commit willful misconduct (i.e., broker fraud) but failed to take action or refrained from taking action to protect an investor against the risk of harm.


One of the most important rules of investing is diversification. If a financial advisor concentrates your portfolio on any individual investment or type of investment, then the risk of losses with that portfolio is dramatically increased.

A broker can be found guilty of practicing overconcentration when he recommends a particular product to clients in large quantities. This most commonly happens with private placements products such as Master Limited Partnerships (MLPs) and Real Estate Investment Trusts (REITs).

Registration Violations

All brokerage firms that sell registered securities must be registered by the State and through the Financial Industry Regulatory Authority (FINRA). If a broker or brokerage firm is found to be selling investments without the correct registration or licensing requirements, an investor is entitled to file a registration violations claim against that firm or individual.


In making an investment recommendation to a client, a broker must make recommendations consistent with the customer's risk tolerance, needs, and investment objectives. Failure to do this can result in losses for investors, especially in cases where the investor was not experienced enough to invest in such a recommendation.

As brokers are upheld to carry out a duty of care when advising customers, those found recommending unsuitable investment recommendations to their customers are committing investment and stockbroker fraud.

Unauthorized Trading

Before placing an order to buy or sell securities for an investor, a broker or advisor must obtain the express permission of that investor. If not, the transaction is unauthorized. If you believe that you have fallen victim to a broker carrying out unauthorized trading on your behalf, you have grounds to file a fraud case.

Failure To Execute Trades

There is little incentive for a broker not to place an order. However, millions of transactions occur each day, and mistakes are made, including failures to place orders. To understand how you can fall victim to this form of stockbroker fraud, read these failure to execute trades & orders situations.

Failure To Supervise

Each brokerage firm must "design and implement written procedures" to properly and effectively supervise the activities of each of its brokers and other employees. When a broker is carrying out unsuitable actions or recommendations in an investor's account, investors can make failure to supervise claims against the particular financial advisory firm.

Breach of Fiduciary Duty

A 'fiduciary" is defined in law as one who has the legal duty to act in the best interest of another. When an investor enters into an agreement to allow a broker to execute trades on their behalf, the broker and brokerage firm must comply with a fiduciary duty to not put their interests before the customers.

In cases where a broker or brokerage firm makes a recommendation to better their own standing rather than respecting the investors' interests, they are committing fraud.

Breach of Contract

A contract is formed when promises are made and consideration paid (or if the person promised reasonably relies on the promise and takes action). These contracts may be made in writing or through a verbal agreement.

When one of the parties involved in the contract goes against the agreed-upon terms, they are found in breach of that contract. If an investor is led to believe that their account will be handled with the utmost care and the broker fails to provide this, the broker is therefore in breach of contract with their customer.

Misrepresentations and Omissions

A brokerage firm or broker can be held liable for broker and investment fraud if that firm or broker misrepresents material facts or omits to disclose material factors to the investor regarding an investment, and that client subsequently loses money on that investment.

Financial advisors commonly use misrepresentations and omissions to disguise risks associated with particular investment products.

Get in touch with SSEK Law Firm today if you believe that you have fallen victim to any of the stockbroker fraud areas mentioned above. Our securities attorneys have helped many investors across the United States to recoup losses they incurred through the actions of their financial advisors.

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